Procurement Management Plan
Objective
The purpose of this procurement management plan is to document the framework and all the stages of procurement activities. The plan defines the steps in choosing a contractor for the maintenance of the new heating, ventilation, and air-conditioning (HVAC) system in Strategy Consulting Choice, Ltd. (the Client).
Services to be Procured
Services to be procured are HVAC services (the maintenance of the already installed system) for a 5-story building located in the central business district of the city of Perth (12/1 St George’s Terrace, Perth, Western Australia). The area of this commercial building is 2500 m2.
Business Need
The previously used HVAC system was regarded by evaluators as outdated, and it was reinstalled to address modern safety norms and standards. The building was constructed more than 20 years ago, and complex changes in the HVAC system were necessary. The Client organized the installation of a completely new innovative HVAC system, but the supplier that had provided services became bankrupt and could not proceed to work with the company. The Client needs to receive regular maintenance and monitoring services for their new HVAC system.
Key Considerations
Currently, the Client has an open position as a supplier of HVAC services depending on the situation around the previous cooperation with the firm that became bankrupt. According to the principles of procurement management, it is necessary to start with determining what services need to be procured, what requirements should be addressed, and what suppliers can be chosen (Jiang 2017). Therefore, it is necessary to identify the need and associated requirements and focus on developing a complex plan to reflect an appropriate type of contract, deliverables, deadlines, and performance measures (Jiang 2017; Pheng 2017).
At the initial stage of developing a procurement plan, it is necessary to perform the make-or-buy analysis to assess financial costs associated with procuring certain services (Fleming 2019). Other important aspects to consider include the assessment of potential benefits for a company, the focus of potential suppliers on sustainability, and the determination of the scope of work (SOW) (Pheng 2017). The conducted make-or-buy analysis, as well as the evaluation of the present situation, have demonstrated that the Client needs to find a local supplier in the sphere of providing HVAC services for organizations that specializes in using specific technologies and equipment while referring to the type of the system that was previously installed in the company. This criterion is critical for making an appropriate decision while selecting a supplier meeting the Client’s expectations.
Identification of Potential Suppliers
Depending on the information found on the websites on HVAC services suppliers in Perth, WA, the list of potential contractors who install and manage specific HVAC systems used by the Client has been completed by the technical team (“Air Conditioning Repair Perth WA, Australia: Home Page” 2018; “The Best HVAC Service in Perth” 2019). Before sending potential contractors the request for quotation, they should be contacted by e-mail to determine whether they provide the required services and whether they are interested in the project (Darr 2019). The request for quotation should be sent only to those potential contractors who have an interest in the project and resources to provide services (Sanghera 2018). In addition, it is important to advertise the position on the websites and review the sent quotations.
The received quotations should be analyzed in terms of the quality of offered services, their price, adherence to requirements, and schedules (Jiang 2017; Fleming 2019). After selecting suppliers addressing the Client’s expectations, they have been contacted, and meetings have been organized to discuss the contract details and make the final decision (Darr 2019; Fleming 2019). When the most appropriate supplier is selected, the meeting for discussing and signing the contract is scheduled.
Financial Considerations
The expected cost of the HVAC services determined by the company’s financial and technical managers is $40,000-45,000 per year, depending on the fact that only the HVAC system maintenance is required (Bearg 2019). Referring to these desired costs, the most appropriate supplier will be selected. The fact that this sum can be adjusted annually depending on the inflation rates is also taken into account (Fleming 2019).
Procurement Methods
The procurement method selected for this project is based on the request for quotation. The reason is that this method is applied for providing comparably small-valued services (Jiang 2017). In the context of this project, the provision of maintenance for the HVAC system in the company is regarded as a small-value service. This procurement method addresses the Client’s needs regarding the time required for organizing the procurement process and selecting contractors (Fleming 2019). The request for quotation includes the list of requirements specified by the technical team and managers for potential contractors (Table 1). Essential criteria are not weighted to influence the decision on rejecting a contractor or proceeding with the evaluation (Fleming 2019). Desired qualities are scored and weighted according to the meanings provided in Table 1 to determine the importance of a certain criterion.
Three potential suppliers who met these criteria have been contacted by e-mail to discuss the details of the contract and select the supplier addressing the Client’s expectations. This approach allows for focusing on the essential criteria for the company and evaluating the potential outcome of developing a productive relationship with these suppliers (Pheng 2017). The company’s managers have organized the face-to-face meeting only with the supplier chosen for awarding the contract.
Risk Analysis
The risk analysis for this project should be performed with reference to the determination of potential risks and their evaluation referring to the probability of a risk, significance of its consequences, and the mitigation plan (Fleming 2019; Jiang 2017). The values for probability and the impact of consequences are determined taking into account both the likelihood and the impact, and they are presented in Table 2 in qualitative terms (Darr 2019). Risks are presented in descending order.
Table 2. Risk Analysis Matrix
Type of Contract
The type of contract selected for this project is a fixed-price contract with price adjustment. The reason for selecting this type of contract is that the Client requires the procurement of services during 3 years minimally (Fleming 2019). The contract proposed to the supplier provides the details regarding the SOW, the notes on the expected quality of services, a schedule or timing, as well as the fixed price for delivering HVAC services in the building. The SOW for maintaining the HVAC system will not change during more than one year, and the fixed price will be paid for each type of service offered by the Contractor. The focus on a fixed-price contract with price adjustment guarantees the revision of the payments at the end of each year of the Contractor’s cooperation with the Client (Jiang 2017; Pheng 2017). The inflation-adjusted price is selected for this purpose to address the Client’s and Contractor’s expectations (Sanghera 2018). The contract can be revised and necessary changes can be added depending on the notice sent by the Client or Contractor and discussed or approved during the meeting at the end of each year of cooperation.
The contract will be signed for 3 years, price adjustments for certain services will be discussed by the Client and the Contractor each year. Payments will be provided quarterly and annually (based on invoices) for offering regularly scheduled services, and additional payments for extra-schedule repairing or services will be provided immediately according to the price list approved when signing the contract (Fleming 2019; Pheng 2017). The contract includes the statement on penalties imposed on the Contractor for not addressing the SOW, performing services of low quality, delays in providing services, and violating the contract statements. The Client can terminate the contract depending on the quality of procured services while informing the Contractor 3 months in advance. The Contractor can terminate the contract in 3 years without penalties and in every 12 months with penalties described in the contract.
Schedule
Figure 1: represents the schedule for the procurement planning process
Scope of Work
Purpose
The purpose of the SOW is to list the services procured from the Contractor to address the Client’s needs. It is important to determine what services should be proposed as obligatory ones and what services are not included in the responsibility area of the Contractor (Fleming 2019; Pheng 2017). Thus, the selected provider of the HVAC services is responsible for the maintenance of the HVAC system used in the commercial building located at 12/1 St George’s Terrace, Perth, Western Australia.
Glossary
- The Client Strategy Consulting Choice, Ltd
- The Contractor The organization providing HVAC services
- Facility The building located at 12/1 St George’s Terrace, Perth, WA
- SOW Scope of Work
- KPIs
- Key Performance Indicators
- Deliverable Expected outcomes
- HVAC system The Heating, Ventilating, and Air Conditioning system for controlling the environment in buildings
- Breakdowns Problems in the work of HVAC equipment
- OH&S Regulations Occupational Health and Safety Regulations
Responsibility Matrix
Table 3 represents the responsibility matrix referring to the activities and persons responsible for their completion according to the contract.
Table 3. Responsibility Matrix
Deliverables
Assumptions
- The Contractor is responsible for the maintenance of the Client’s HVAC system in the building (all floors).
- The Contractor is responsible for preventing breakdowns, monitoring the performance of the system.
- The Contractor is responsible for determining issues/problems in the functioning of the HVAC system and associated repairing.
- The Contractor is responsible for providing services according to the set schedule.
- All services are performed under the supervision of the company’s technical staff.
Exclusions
- The Contractor is not responsible for installing new equipment, replacing the existing one.
- The Contractor is not responsible for upgrading the existing equipment.
- The Contractor is not responsible for making changes associated with repairing activities in the electricity system of the building.
Description of the Building
The Client’s 5-story facility has a total floor area of 2500 m2, the area of each floor is 500 m2. Figure 2 provides the floor plan for the building, which is the same for all 5 floors. There are 4 offices and the reception, storage, and break areas on each floor. Figure 3 represents the basic scheme of the HVAC system used in the building. This system contributes to saving energy and water resources that are used for cooling and heating the air in offices.
Key deliverables
Maintenance and monitoring services
- Planned evaluation of the work of commercial heating systems, including boilers and heaters;
- Planned evaluation of the work of the ventilation and air conditioning system;
- Changes in settings of the equipment depending on the season and staff needs;
- Preventive cleaning of the elements of the HVAC system, including the ductwork;
- Repair of the existing HVAC installations on demand;
- Performance of fire risk assessments;
- Monitoring of the temperature in the building/the temperature of water;
- Monitoring of the air quality;
- Monitoring of the work of condensing and filtration equipment.
Ad hoc activities
- Evaluation of the necessity of using air source heat pumps;
- Evaluation of the necessity of upgrading and new installations.
Additional Requirements
The Contractor supplies all the tools, materials, and equipment required for monitoring and repairing the work of the HVAC system. The used tools and materials are of high quality, and they correspond with the OH&S Regulations and the national safety and quality standards of Australia (Bearg 2019). The Contractor is responsible for guaranteeing the efficient use of energy and other resources for its activities, adhering to the principle of sustainability to decrease resource consumption and the negative impact on the environment (Bearg 2019). The regular activities associated with monitoring and repairing the equipment are performed on Saturdays when there is no staff in the building. If repairing or the provision of extra services requires more time than 12 hours on Saturday, the Contractor informs the Client 3 days before the planned activities to make necessary changes in the schedule. The list of activities that can be performed without disturbing the staff is approved when discussing the contract.
Performance Measurement
General
The quality of the provided services will be assessed according to criteria presented in the contract and associated KPIs. Scheduled evaluations will be conducted quarterly and annually, and the results of assessments should be reflected in the performance assessment reports sent to the Contractor (Pheng 2017). If the provided services are of low quality or the Contractor’s activities cause breakdowns in the work of the HVAC system, the notice will be sent to the Contractor, and related penalties should be determined. Necessary corrections need to be realized within 3 working days.
KPIs
Table 4 presents the list of KPIs, according to which the performance of the Contractor will be measured with reference to the regular evaluation of the provided services.
Table 4. KPIs
References
“Air Conditioning Repair Perth WA, Australia: Home Page.” 2018. AC Repair Perth. Web.
Bearg, David W. 2019. Indoor Air Quality and HVAC Systems. New York: Routledge.
“The Best HVAC Service in Perth.” 2019. Three Best Rated. Web.
Darr, Will. 2019. Advanced Issues of Procurement Management. New York: Tredition.
Fleming, Quentin W. 2019. Project Procurement Management: Contracting, Subcontracting, Teaming. Tustin: Project Management Institute.
Jiang, Zhenying. 2017. Procurement Management in the Supply Chain Environment. Oxford: Chartridge Books Oxford.
Pheng, Low Sui. 2017. Project Management for the Built Environment: Study Notes. Singapore: Springer.
Sanghera, Paul. 2018. CAPM® in Depth: Certified Associate in Project Management Study Guide for the CAPM® Exam. 2nd ed. San Francisco: Apress.